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Profitable Depositors Expect Free Services That Banks Are Eliminating

A lucrative segment of consumers wants free checking with free linked savings accounts, but many banks are eliminating their free services. Are they shooting themselves in the foot?

By Rob Rubin, Managing Director, Novantas

Many banks are shedding their “low value” customers by eliminating free checking accounts. But financial institutions may be throwing the proverbial baby out with the bath water because there is a high-value segment of consumers that want free checking… with a free linked savings account. Who’s picking up the pile of relationships that traditional institutions are leaving behind? Direct banks.

Do you need a free linked savings account with your new checking account? Don’t care Nice to have Must have
Percent of Q2 2013 FindABetterBank Shoppers 66% 24% 10%
“Selected” a checking account because of low fees 35% 38% 41%
Mean lowest daily balance $1,221 $1,399 $1,928
Percent that wants overdraft protection 68% 78% 82%
Percent selecting a Direct Bank 20% 28% 32%
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On FindABetterBank, checking account shoppers are asked which features are important. Ten percent of shoppers indicate they “must have” a “free linked savings account.” This is an interesting market segment of bank shoppers; they are cost conscious, carry much higher balances, and are more likely to want additional features like overdraft protection.

In Q2 2013, those who checked off that they “must have” free linked savings accounts were 60% more likely to select a checking account from a direct bank compared to people who “don’t care” about having free linked savings accounts.

All of the direct banks on FindABetterBank offer free checking and include free linked savings accounts. But only 53% of the other institutions on FindABetterBank bundle free savings accounts with any checking account — and most only offer free linked savings accounts with their high-end checking products. However, as these data demonstrate, direct banks have been able to win this segment of high value customers by bundling free checking and savings accounts.

Banks have been able to shed customers they can’t turn a profit on anymore by eliminating free checking products. But what’s the impact on new customer acquisition? Is it worth losing a potentially profitable segment of cost conscious consumers?


Insights from Rob RubinRob Rubin is Managing Director of Novantas Data Services. His research leverages insights captured from thousands of bank shoppers every day while they are actually thinking about- and in the process of shopping for a new bank.

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